Just when it was beginning to rebound after the ceasefire and the publicity surrounding the 50th anniversary of the first ascent of Mt Everest, Nepal's tourism is in a tail spin again.

Now with news of violence, curfews and bandhs, tour groups are cancelling their Nepal holidays and the figures for arrivals in 2003 are likely to fall to 150,000-the lowest since 1998. Even though no tourists have been harmed in the past seven years of conflict and most trekking areas are as safe as they have always been, international media coverage of the insurgency has made tourists nervous.

"It's not that the tourists are afraid to visit Nepal," one Kathmandu tour operator told us. "But they want us to guarantee their safety-something that we are unable to do." The travel industry says only one thing will save it now: a joint declaration by Maoists and the army that trekkers will not be harmed. Cancellations for the autumn season are coming in thick and fast, spreading the doom and gloom in tourist areas like Thamel.

After 15 years in the business, Sanat Shrestha is planning to shut his tours and trekking office in Thamel. Twenty people who worked to make Explore Alpine Adventure the successful venture it once was, will be out of their jobs. "I don't know what am I supposed to do now. Tourism is the only thing I know," says one of his staff. Even Shrestha is unsure about his future. "I don't know where to invest anymore, I don't know where to go," he says.

At the beginning of August, Shrestha's autumn bookings were looking good. He had 80 German and Slovenian groups coming in. Last week all 80 groups cancelled. Shrestha was shattered and that was when he decided that he had to close. "I had no other option," he told us. He needs a minimum of Rs 100,000 every month for rent, staff salaries and other recurring expenses.

After the January ceasefire, Nepali tour operators were surprised by the volume of bookings from the US, which had suffered heavily since September 2001. But when Maoists started their strong anti-American rhetoric as they broke the ceasefire, it spooked the Americans again. A trekking guide who recently returned from western Nepal told us Maoists warned him against bringing tourists from the US, UK and Belgium.

Although they know that the end of the ceasefire was to blame, many tour operators lash out at some Kathmandu-based embassies for their over-cautious advisories. Ang T Sherpa, president of Nepal Mountaineering Association (NMA), agrees: "I was in Germany when the ceasefire was still on, but I was surprised to hear from the consul generals that they did not get the correct information from Nepal." When in London recently, Sherpa was surprised by the positive interest that a lot of people displayed, thanks in part to the Everest Golden Jubilee earlier this year. Queries and bookings for adventure tourism poured in.

In fact, mountaineering is the only silver lining for this autumn season. More than 100 expeditions are still coming to Nepal, buoyed by the Everest publicity. Larger trekking agencies and those handling mountaineering expeditions don't report as many cancellations. "I don't think the situation matters to these adventure tourists who are totally different from luxurious cultural sightseeing tourists," says Sherpa. "Nepal is still safer than New York."

Although Sherpa does not want to make a blanket statement on the safety of Nepal, he points out that since the 'people's war' began, about 3.5 million tourists visited Nepal and not a single one was harmed by the rebels. Nepal has remained a safe destination for the tourists, unlike the Philippines and Indonesia.

"We're confused: if we tell them that Nepal is not safe then our tourism business will collapse but if we tell them not to worry, visit us, then who will be responsible in case they happen to get hurt?" asks Sherpa.

Nepal Tourism Board and private trekking offices invested a lot of money on promotional tours and exhibitions abroad during the ceasefire. Hotels spent millions on redecorating and renovations to welcome what they hoped would be the first of a tide of tourists during Dasai and Tihar. Now, it's a grim situation, especially for those who took out loans for the business that is not going to come.

"I don't know how we're going to cope with this. If the problem persists, what is the next step for us?" Rajan Sakya of the legendary Kathmandu Guest House asks no one in particular. This is the oldest budget hotel in Thamel, one that set the trend for a new kind of tourism in Nepal in the 1970s. It was recently ranked as one of Asia's top hotels out of 300 surveyed by Asia's Best Hotels & Resorts but that recognition is useless if there are no tourists.

Sakya is in a dilemma because if business does not pick up he may have to lay off most of his 150 staff, people who are like family after working for more than a decade. "I don't even want to think about it," he says. He is concerned for his junior staff, many of whom are not qualified enough to find new jobs.

Sakya has just taken over from his father, Karna Sakya, who founded the hotel. He is confident Nepal's hotel business can develop and attain international standards, but things are discouraging. "It's now become a question of day-to-day survival," he says.

If a popular hotel like Kathmandu Guest House faces such a crunch, one can only imagine the crisis in other tourist-based businesses. Occupancy is less than half in most lodges and inns, even with drastically reduced rates that barely cover overheads. Some five-star hotels in Kathmandu are giving away rooms for $20-40 that are listed as $100-150.

"We charge according to what the clients offer us," says Sundar Shrestha, the owner of the low-budget Hotel Sweet Dreams. He survives on walk-in Spanish and Japanese tourists who pay less than Rs 200 for a room with an attached bathroom. "There's no work at all, we just sit idle and wait for someone to turn up," says waiter Ramesh Shrestha in Sweet Dream's little restaurant.

The only recourse left for travel and tour operators is to wait for the Maoists to declare peace on tourists like they did last year. The associations of various tourism-based sectors met with human rights activists like Padma Ratna Tuladhar and Daman Nath Dhungana last week to request that the Maoist leaders announce tourists will not be harmed. Joy Dewan, ex-president of Nepal Assocation of Travel Agents sums it up: "All we can do is wait for their response. This is a war between the state and the Maoists. Tourists have nothing to do with it."

Pessimism in Pokhara

This should be the season in which Pokhara is filling up with trekkers bound for the Annapurnas. The restaurants by the lakeside should be full, the airport should be humming with activity. Not this year. More than most other big towns in Nepal, Pokhara's fortunes are tied with tourism. With the ceasefire, hopes were high that tourists would return and they had started trickling back. Indian tourists had come to Pokhara since May and kept the rooms occupied.

Although there have been no major attacks in Pokhara since the ceasefire broke down three weeks ago, the traffic has already fallen off. Reports that trekkers have been forced to pay Rs 1,000 'revolutionary tax' to Maoists at Birethanti hasn't helped matters, and the word is spreading of Maoist harrassment along the trails.

Some of Pokhara's tourism entrepreneurs have left for America or Europe. "If it goes on like this, I'll leave too," says the ex-chairman of the Hotel Association here, Sundar Kumar Shrestha. Many hotels are not even able to pay their electricity bills. Pokhara's largest hotel, Fulbari, owes the NEA Rs 10.8 million and recently had its electricity cut off. The hotel now uses its generator. In the past 15 years, fed by a tourism boom, 300 new hotels were built here to cater to the annual 100,000 visitors. This year, the number is expected to be less than half. Says Biplab Poudel of the Hotel Association: "There used to be a time when all rooms in all hotels were booked. As soon as we took out bank loans and added rooms, the tourists stopped coming." (Ramesh Poudel in Pokhara)